Contract and Consumer Protection Law

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CHAPTER 10 - ConsumerProtection LawPerformance Criteria1.1 Identify client's circumstances that require advice on contract or consumer lawmatters1.2 Research contract and consumer law and related legislation, regulation andpractice1.3 Identify different types of relevant contract and consumer transactions, andclearly outline their legal context, establishment procedures and purpose1AIdentify legal principles applying to contract and consumer matters that arerelevant to client circumstances2.1 Identify areas of risk in application of law in contract and consumer matters2.2 Analyse how legal issues impact on different types of business structures andlegal entities2.3 Evaluate relevance to client circumstances and implication of risks for structure,operation and performance of different legal entities3.1 Collect and collate client's available information for analysis3.2 Interpret, analyse and process available information to obtain requiredknowledge applicable to client's circumstances3.3 Seek advice and guidance of specialist, if required, to interpret, analyse andsynthesise client and legal information3.4 Provide advice to clients based on their circumstances and relevant law4.1 Review client's circumstances and apply any changes in relevant aspects ofcontract or consumer law4.2 Review relevant legal sources regularly and apply any changes in daily work4.3 Access and use systems for keeping up with changes and maintaining up to dateknowledge about relevant legal aspects of contract or consumer lawWhat you will learn in this ChapterIn this Chapter, we outline how consumers purchasing goods or services areprotected by the 'Australian Consumer Law.' This includes an exploration of theguarantees that come with all transactions between sellers and consumers; productsafety requirements; and the unfair business practices that must be avoided. Finally,we examine how the 'Australian Consumer Law' is enforced and the remediesavailable if it is breached.

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Chapter Structure10.1 Introduction to Consumer Protection Law10.2 Consumer Guarantees□Guarantees Applying to Goods.□Guarantees Applying to Services.□Remedies.10.3 Product Safety□Mandatory Safety Standards.10.4 Business Practices□Misleading or Deceptive Conduct.□False or Misleading Representations.□Pyramid Schemes.□Pricing.IUnsolicited Transactions.□Referral Selling.□Lay-by Agreement.□Harassment and Coercion.□Proof of Transaction.IUnconscionable Conduct.□Enforcement and Compliance.□Remedies and Penalties.10.1 Introduction to Consumer ProtectionLawThe development of modern consumer law in Australia has partly been in responseto the changes and demands of its social and economic environment. These include;□mass consumption - commencing in the 1970's and 80's, this social andeconomic behaviour continues to accelerate and grow exponentially;□modem marketing techniques;□constantly evolving technologies;□readily available consumer credit;□development of new and complex products.In response to the changing nature of consumerism, during the 1970's and 1980'smany acts were passed by the state and federal governments to provide legislativeconsumer protection, including the state fair trading acts and the very powerfulfederal Trade Practices Act 1974, (TPA).

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By 2008 this resulted in an extremely complicated consumer law system spreadacross the country, involving much duplication and some inconsistency, including 17state and territory acts in addition to the TPA. Consequently, following the "NationalPartnership Agreement to Deliver a Seamless National Economy" by COAG, and theAustralian Productivity Commission's Review of Australia's Consumer PolicyFramework, the federal, state and territory governments agreed to implement asingle national consumer law for Australia, which came fully into force on January 1,2011.The Australian Consumer Law (ACL) is based on the consumer protection provisionsof the TPA and supplemented by best practice reforms from the states andterritories. The 9 consumer protection regions which already existed have beenunited into one consistent and cohesive set of rules that now apply across Australia.In consolidating the consumer law framework, the ACL is an "application law".Enacted as a law of the Commonwealth, the states and territories apply the ACL asa law of their jurisdiction, making such a state or territory a "participating jurisdiction".The ACL is drafted to apply to 'persons' so is applicable to any form of businessenterprise, including a sole trader, partnership, or corporation.The ACL, found under Schedule 2 of the Competition and Consumer Act 2010 (Cth)(CCA) provides consumers with significant protections when dealing with suppliersand manufacturers.The consumer protection and unfair trading provisions of the CCA have a greaterimpact on business operators and consumers than any other common law orlegislative area.The CCA sets out clear codes of conduct for the Australian business community andcontains provisions intended to:□Limit the growth of monopolies.□Create a competitive and efficient economy.nRegulate business and trade practices.In this chapter we will examine:□The guarantees entrenched in all consumer transactions by the ACL as to thequality and durability of goods and the provision of services.□Product safety.□Business practices which require compliance.□Prohibited unfair business practices.IHow the ACL is regulated and enforced.The TPA law required consumers to rely on implied terms in the contract for sale ofgoods and services between a business and a consumer to enforce their rights. TheACL has instead established a series of consumer guarantees, clearly expressedand requiring statutory compliance. (A side effect of which is the elimination of thedistinction between conditions and warranties as implied terms in the contracts forsale of goods and services to consumers.) For the guarantees to apply the purchase

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must be made by a person who falls under the definition of "consumer 'set out in theACL.Who is a 'Consumer'?Under the ACL, a consumer is a person who acquires:□Any goods or services up to $40,000;UAny goods or services for personal, domestic or household purposes; or□A vehicle or trailer for use on public roads.A person will not be a consumer if the person acquired the goods:□For the purpose of re-supply; orI For the purpose of using them, in trade or commerce;□In the course of production or manufacture; or□In the course of repairing or treating other goods or fixtures on land,As can be seen, the focus of the ACL is to protect members of the general publicwhen they make purchases in their day-to-day lives, rather than offering protectionsfor large businesses making commercial purchases.ExampleQ. Ihab buys a musicbox for the purpose of selling it to Jacqueline in the course ofhis business. Will the ACL offer him protection?A. No, because the ACL does not apply to goods acquired for the purpose of re-supply.Self-testing Exercise 1 ___Do the following count as 'consumers' for the purposes of gaining ACL protection?□Gina buys a car for $52,000.□Yes, the purchase of a vehicle for use on public roads makes someone acustomer (regardless of how much it costs).HAllGoods Pty Ltd is a store that bought bolts to help put together a range ofoffice chairs it is selling.□No, because a consumer cannot be someone who uses the goods in thecourse of trade and commerce, to manufacture other goods.HAllGoods buys $700 worth of paper clips and staplers for its staff to use.□Yes, AllGoods is a consumer (even though they are being used for thepurposes of trade and commerce, it is not to repair, treat, produce or manufactureother goods).

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10.2 Consumer GuaranteesConsumer guarantees are imposed by the ACL in all consumer transactions. Thismeans that there are several specific guarantees that must be met by businesseswhen they sell goods and services to buyers who fall within the definition of a'consumer' under the ACL. Under s64 ACL it is illegal for contracts to include termsthat attempt to remove these guaranteesOnline Tip: The ACCC has a video online that helpfully outlines the consumerguarantees enshrined in the ACL. Watch it here:http://www.accc.gov.au/content/index.phtml/itemld/957871Guarantees Applying to GoodsAcceptable quality of goods - s54 ACLACL s54 specifies that if a person supplies, in trade or commerce, goods to aconsumer, (not by auction) there is a guarantee that the goods are of acceptablequality. Acceptable quality is defined as:□Fit for all the purposes for which goods of that kind are commonly supplied;and□Acceptable in appearance and finish; andI Free from defects; and□Safe; and□Durable as a reasonable consumer, with knowledge of the condition of thegoods would accept.Durability therefore concerns the life of the goods and will change depending on:□The nature of the goods.I The price of the goods (if relevant).□Any statements made about the goods on any packaging or label on thegoods.□Any representation made about the goods by the supplier or manufacturer ofthe goods; andI Any other relevant circumstances to the supply of the goods.Breach of the guarantee of acceptable quality will not occur where.□Issues that would otherwise mean that goods would not be of acceptablequality are drawn to a consumer's attention prior to supply.□The consumer examines the goods prior to agreeing to purchase and thatexamination ought reasonably to have revealed that the goods were not ofacceptable quality.This provision, while intended to clarify what is required is still subject to context andcircumstances. What one person may consider reasonably durable for the money,another may not. One must still take into account factors such as the price paid,whether the goods are second-hand and the nature of the goods to determine what

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can realistically be expected. For example, a used couch that only cost $200 cannotbe expected to be of the same quality as a new couch that cost $2,500.ExampleBarry purchases a toaster from a retailer. The first time he plugs it in and uses it, thetaster sparks and triggers his electrical safety switch. The toaster is clearly faulty anddoes not meet the consumer guarantee of acceptable quality.Helpful Hint: The duration of acceptability depends upon the nature and purpose ofthe goods - it is clear that goods must remain acceptable for a reasonable time aftersale but what is reasonable to some extent relies on how much a buyer pays for thegoods, and the nature of the goods. Breach of the guarantee of acceptable qualitycannot occur when the consumer knows or should have known of any defects beforepurchase.Fit for purpose - ACL s55Tf a person supplies goods to a consumer there is a guarantee that they arereasonably fit for any disclosed purpose and fit for any purposes they are expectedto fulfil.Four conditions must be satisfied for this guarantee to apply:□Has the buyer made known either expressly or impliedly the particularpurpose for which the goods are required?□Has the buyer relied on the seller's skill and judgement?□Are the goods of a description that it is in the course of the seller's business tosupply?I Has the buyer ordered goods under their patent or trade name so that it isclear there is no reliance on the skill and judgement of the seller?So, in determining whether there has been a breach, the court will examine whatinformation the supplier gave to the consumer. That is, a consumer has the right torely on the skills of the supplier and how they describe the goods.Helpful Hint: This consumer guarantee applies when specific advice is sought from aseller, but it also applies so that goods designed to do a particular job or fulfil aparticular purpose do so. For example, if you purchase a printer you do not have tospecifically ask whether it can print. That's its purpose.ExampleVeronica goes to her local hardware shop and asks the hardware assistant for gluethat sticks carpet to wood. He advises her that PetGlue will do the job, but shediscovers that it does not work, even though she follows the instructions. As the glueis not fit for the purposes that the supplier stated, she is entitled to a refund.However, if Veronica goes to the store and asks for PetGlue by name she will not beable to bring an action against the supplier. This is because she did not rely on thesupplier's skills and he did not give her false information about the product.

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ExampleMargaret has recently taken up netball and knows she must have shoes withextremely good grip and ankle support. Margaret goes to the speciality sports shop'Body and Sole' and tells the assistant she specifically wants shoes for netball, butrequires advice as she does not know the best kind or brand to buy. The assistantsays not to worry; she knows exactly what Margaret needs. Margaret buys therecommended shoes but while wearing the shoes at the very next game, the shoeslose grip on the court and Margaret sprains her ankle badly.It turns out the shoes were simple walking shoes with little grip and ankle supportand not netball shoes. Consequently, the shoes and the assistant's actions do notmeet the consumer guarantee of fitness for purpose.CaseLavrick v Lease Auto Pty Ltd (2002) FCA 599The applicant was injured when a wheel of a hired motor vehicle which he wasdriving came off. He recovered damages for breach of the undertaking as to fitnessimplied into his hire contract.Correspondence with description - ACL s56If a person supplies goods to a consumer by description, there is a guarantee thatthe goods the consumer receives will correspond or match that description. Thisguarantee commonly applies where the consumer has not actually seen the goodswhen they decide to buy them, but makes their decision to purchase relying on theseller's description of the goods. Examples include ordering goods from a catalogueor relying on packaging. This guarantee is also particularly important whenconsidering its application to online shopping from Australian sites.ExampleHEddie goes to the supermarket to buy cornflakes, his favourite breakfast cereal.He goes to the cereal aisle and finds a box which displays a picture of a bowl ofcornflakes and words which describe the contents of the box as a certain volume ofcornflakes made with certain ingredients. Without physically seeing or touching thecrispy golden flakes, Eddie makes his decision to buy the cornflakes based upon thedescription of the goods on the packaging.When Eddie returns home and opens thebox, he is entitled to expect it is cornflakes as described in the box and not muesli.The goods must match the description.□Patsy feels the need for some retail therapy and logs on to the Australianwebsite 'Bags Galore'. There she finds a picture of a handbag with many pocketswhich is described as red leather with silk lining. Patsy purchases the bag, but whenit arrives it does not have as many pockets as the picture and is made of plastic, notleather. This is a major failure of the guarantee that the goods should correspondwith their description and would entitle Patsy to return the goods and receive arefund. If goods are supplied by description as well as by reference to a sample ordemonstration model both guarantees apply.

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Correspondence with sample or demonstration model - ACLS57If a person supplies goods to a consumer by reference to a sample or demonstrationmodel there is a guarantee that the goods will correspond or match that sample ormodel. Basically this means that if a consumer first sees a sample of a good whenmaking their decision to purchase, the goods the consumer receives must be thesame in quality, state and condition as the sample and be free from any defect. Ifgoods are supplied in reliance on a sample, the consumer must have a reasonableopportunity to compare the goods received with the sample to ensure they matchbefore acceptance takes place.Example□Patsy also visited the furniture shop 'Fabo Furniture', where she found abeautiful red couch on display which was exactly what she wanted - the right size,shape, colour and price.When she went to buy it she was told that it was only adisplay model, and that she would have to order the couch she required. Patsy didso, but when it was delivered it was much smaller and a horrible shade of brownyred. Patsy would not have to accept the delivered couch as the seller has not metthe guarantee that goods must correspond with description.□Paul attended an outdoor furniture shop and found the perfect natural wickertable and chair setting for his veranda for $1,500. When he tried to purchase thesetting the shop assistant said it was only a display model, and that an actual settingwould have to be ordered in and delivered to him. Paul agreed and paid the $1,500for the setting he had chosen. Paul was very upset when the setting delivered to himwas plastic instead of natural wicker, a completely different colour and material tothat which he had ordered. Consequently, the furniture shop has not met theconsumer guarantee for correspondence with sample.Express warranties - ACL s59An 'express warranty' is where suppliers or manufacturers make promises about thequality of their goods (e.g. a knife will be able to cut through leather). A 'warrantyagainst defects' ('manufacturer's warranty') promises that certain action will be takenif something goes wrong with the goods (e.g. repair the goods for free, replace thegoods). These warranties are treated as consumer guarantees meaning thatsuppliers and manufacturers are obliged to live up to these promises if they makethem. It is important to understand that these manufacturer-made 'expresswarranties' do not replace the other statutory consumer guarantees provided underthe ACL, they are an addition to them.Helpful Hint: An express warranty in relation to goods under s2 ACL means anundertaking, assertion or representation:(a) That relates to:(i) The quality, state, condition, performance or characteristics of the goods; or(ii) The provision of services that are or may at any time be required for thegoods; or(iii) The supply of parts that are or may at any time be required for the goods; or

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(iv) The future availability of identical goods, or of goods constituting or formingpart of a set of which the goods, in relation to which the undertaking, assertionor representation is given or made, form part; and(b) That is given or made in connection with the supply of the goods, or in connectionwith the promotion by any means of the supply or use of the goods; and(c) The natural tendency of which is to induce persons to acquire the goods.Repairs - ACL s58Consumers are guaranteed an opportunity to have their goods repaired. That is,manufacturers or importers must take reasonable action to ensure repair of goods isavailable for a reasonable time after purchase. This may include taking such stepsas setting up a place for consumers to take items for repair, or ensuring spare partsare available. For example, Jake purchases a table from a manufacturer, TableTopCo. If the leg of the table breaks off soon after purchase, Table TopCo isobligated to provide a way of repairing the table. This does not necessarily meanTable Top Co have to pay for the repairs (it will depend on why the leg broke off, andif there are any warranties in place and so forth) but they have to provide a way forrepairs to be accomplished.Online Tip: One of the most common areas of consumer complaint concerns faultyelectrical or whitegoods, and how to return them for refund, replacement or repair.You may like to go to the following sites to look firstly at what Choice, the AustralianConsumer Associated discovered, and the industry code prepared by the ACCC.https://www.choice.com.au/shopping/consumer-rights-and-advice/your-rights/articles/ consumer-law-and-extended-warrantieshttp://www.accc.gov.au/publications/electrical-whitegoods-an-industry-guide-to-the-australian-consumer-lawRight to title - ACL s51A seller must have the right to sell the goods. That is, they must have full title(ownership) of the goods, in order to hand them over to the consumer. If they onlyhave limited title, they must make the consumer aware of this.Undisturbed possession and freedom from undisclosed securities - ACLss52-53'Undisturbed possession' means that a third party will not claim to be the true ownerof the goods or have a right in the goods after the sale has taken place. Further, aconsumer has the right to assume when they pay for goods that the goods have notbeen used as security by anyone else. That is, the goods have not been promised toanother as security for a loan. This would mean that another person may be entitledto these goods if the loan is not repaid. If these complications exist, the consumermust be informed of them beforehand for the transaction to be valid.Example

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Q. Darla sells Alfonso an oven but does not tell him that, she has used the oven as apersonal property security to support a loan. Has Darla done anything unlawful underthe ACL?A. Yes, she must live up to the guarantee of a Right to Title. This means that if theydo not have full title to the goods, they must make the consumer (Alfonso) aware ofthis.Guarantees Applying to Services - ACL s60Any services provided to the consumer in the course of trade and commerce mustbe provided with care and skill. Unless the consumer and service provider havealready agreed to a certain time frame for the service to be provided, the consumeris entitled to assume that it will be done within a reasonable time (s62).Self-testing Exercise 2___□Katherine buys a camera for $250 and it falls apart after 18 months. Her friend'scamera is of a similar make and is still working after 18 months. Her friend paid$170. Does the cost have any relevance in determining whether the camera was ofacceptable quality'?HYes, one can take the cost into account. A consumer is entitled to expect that amore expensive item will last at least as well as a less expensive item.IAnn bought a lamp from Margaret. The lampshade fell apart after a week. Annwanted a new lampshade for the lamp, but Margaret refused. Has Margaret doneanything unlawful? Explain your answer.□Under s58 of the ACL, the opportunity for repairing broken goods has to bemade available by Margaret. Margaret should, therefore, have spare parts availablefor Ann.□Bindy agreed to mow Ally's lawn as part of her business. Bindy showed up 4months after their agreement to do the job. Has Bindy done anything unlawful?Explain your answer.□Bindy has acted unlawfully. Services should be provided within a reasonabletime (unless Ally and Bindy came to some other arrangement of when the lawnshould be mowed) (s62 of the ACL).RemediesWhen consumer guarantees are breached, there are several remedies available.The remedy will depend on which guarantee was not met, and the surroundingcircumstances.Remedies Relating to GoodsIf there are 'major failures' (i.e. defects) with goods, the consumer can choose to:□Obtain a refund.□Obtain an identical replacement.□Detain the goods and get compensation for the problem.

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□Have the goods repaired (ss260-261, ACL).'Major failures' may be found in situations where the goods are unsafe, unfit for use,significantly different from the description, or where the reasonable consumer simplywould not have bought the goods if they knew about the problem.A consumer will not have the right to a refund or replacement where the rejectedgoods cannot be returned (e.g. they have been thrown away or lost) or where toomuch time has passed (this will depend on several factors including how long thegoods could reasonably be expected to be useable).If a consumer wants the goods repaired, the supplier must fix the goods within areasonable time. If they refuse or take too long to fix the goods, the consumer maytake the goods elsewhere to be fixed, and request that the supplier pay the costs.Where the failures are minor, the consumer cannot automatically demand a refund ifthe goods can be repaired within a reasonable time. In this situation, the choice is upto the supplier, whether they will go ahead with the repairs or offer some otherremedy such as a remedy or replacement.ExampleAccording to the ACCC Electrical/ Whitegoods Guide to Industry Code the followingwould amount to major failures with a product:H When a reasonable consumer would not have bought the product if they hadknown about the problem - e.g. no reasonable consumer would buy awashing machine if they knew the motor was going to bum out after 3 months.□The product is significantly different from the description, sample ordemonstration model shown to the consumer - e.g. a consumer orders a redfood mixer from a catalogue, but the mixer delivered is green,□The product is substantially unfit for its normal purpose and cannot be madefit within a reasonable time - e.g. an underwater camera turns out not to bewaterproof because it is made from the wrong material.□The product is substantially unfit for a purpose that the consumer told thesupplier about, and cannot be made fit within a reasonable time -e.g. a videocard is unsuitable for a consumer's computer, despite the consumer telling thesupplier the computer specifications.□The product is unsafe - e.g. an electric blanket has faulty wiring.U Where there is a minor failure that can be fixed but is not actually fixed withina reasonable time. Determining what constitutes a reasonable time will varydepending on the circumstances of each case such as;oWhether the product is new or second-hand.oHow many times repair of the fault has been attempted.oThe nature of the fault and whether it can be identified.If several attempts have been made at repair, this indicates the original assessmentmay have been wrong and the fault was not one that could be fixed within areasonable time. The consumer would therefore be entitled to the remedies for amajor failure.

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Remedies Relating to ServicesWhen there is a 'major failure' with services, the consumer can:HObtain a refund; or□Seek compensation for what went wrong with the service provided (s267, AL).A 'major failure' with services may be found in situations where the services havecreated an unsafe situation (e.g. a tradesperson has not properly secured a fence),are substantially unfit for the purposes for which they were sought (e.g, a caterer didnot have the proper facilities to provide food for the number of people at an event) orthe reasonable consumer would never have sought these services if they knewabout the problems involved.The amount refunded for poor services provided, will depend on whether all or partof the services were deficient. For example, a plumber who fixes the toilet properlybut the sink improperly will only have to refund money for the sink repairs. They cankeep the amount paid for the toilet repairs.Consequential LossIf loss occurs as a consequence of a consumer guarantee not being satisfied, theconsumer can claim for compensation. For example, if the colour on a raincoat runsonto clothes someone is wearing underneath, the supplier is liable, not only to refundthe money for the raincoat (or another remedy for faulty goods as discussed above),but also for the consequential loss of what happened to the person's clothes.Manufacturer's and Importers' LiabilityWhen consumer guarantees are not satisfied, one normally takes it up with thesupplier. There are a few instances, however, when it will be more appropriate totake action against the manufacturer. Specifically, remedies can be sought againstmanufacturers when:□The goods are not of 'acceptable quality;□The goods do not match their descriptions;IThere was no acceptable opportunity for repairs available; or□They did not live up to an express warranty (if one was provided).The manufacturer is only liable if they were the ones responsible for theseguarantees not being met. For example, if the goods were damaged in the store,then it is not the manufacturer's responsibility if they are now not of "acceptablequality'.The effect of ss271 and 272 ACL is to make manufacturers concurrently liable withthe immediate supplier of the goods where the required conditions are met. Themanufacturer must also indemnify any supplier who may be required to paydamages to a consumer as a result of a liability of a manufacturer under a consumerguarantee. These terms cannot be excluded.

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To be the manufacturer of the goods, a person must either:□Manufacture the goods.□Hold themselves out to the public as the manufacturer of the goods.□Cause or permit its business or brand name to be applied to the goods.Fl Cause or permit another to hold it out to the public as the manufacturer of thegoods; or□Import the goods from a manufacturer who doesn't have a place of businessin Australia - the importer is then liable as if they were the actual manufacturerof the goods.Product Liability of Defective GoodsSI 38 of the ACL imposes strict liability on manufacturers and importers of defectivegoods that cause personal injury or property damage so there is no need to provenegligence. If the goods have a defect and an individual or their property (includinggoods and land, buildings or fixtures) is injured or damaged because of the defect,the manufacturer is liable to compensate the person suffering the loss. Indetermining the extent of safety of the goods, the court must take into account all therelevant circumstances, including:□The manner in and purposes for which the goods have been marketed:□The packaging of the goods.□The use of any mark in relation to them.□Any relevant instractions or warnings.□What could reasonably be expected to be done with the goods; and The timewhen the manufacturer supplied the goods.The manufacturer may be liable to compensate:I An individual who is injured (si 38).□An injured third party, such as a bystander (si 39).□A person for damage to personal, domestic or household goods (si 40); and□A person for damage to land, buildings or fixtures (s141).The duration of a manufacturer's liability is such that the consumer has a right tobring an action at any time within three years after the day on which the causeaccrued, with an absolute limit of 10 years from the date of the first supply of thegoods.Defences of Manufacturers and Suppliers (si 42)□The defect didn't exist at the time the goods left the manufacturer, butoccurred elsewhere in the distribution chain;□The goods had the defect only because they complied with a mandatorystandard.□The defect couldn't have been discovered at the time of supply because thestate of scientific or technical knowledge wasn't capable of detecting that typeof defect; and□The goods formed part of other goods and the defect is attributable only to thedesign of the finished goods. If a defective part is incorporated into finished

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goods, making the finished goods defective, both the component and thefinished goods manufacturer will be liable to pay any compensation for anyloss that may occur.Commercial Tip:Among the ACL reforms therefore is the right to insist that asupplier (including an importer) resolve a problem with a product, rather thanreferring the customer to the manufacturer. If a customer does take the issue up withthe supplier (e.g. demand a refund) that supplier may be entitled to then seek aremedy from the manufacturer (e.g. demand reimbursement for the refund).CaseGlendale Chemical Products Pty Ltd v ACCC (1998) FCA 1571Mr Barnes purchased an acidic cleaning soda, 'Drano', to clear out a blocked drain.The instructions on the product advised users to dissolve the soda in water but didnot specify whether hot or cold water should be used. Barnes combined the sodawith hot water in the drain resulting in the mixture shooting up from the narrow pipeburning his face and eyes.The court held that the manufacturers of 'Drano' were liable for the bums suffered byBames because of the inadequate labelling. He was entitled to know the dangersassociated with use of this product.CaseEffem Foods Ltd v Nicholls (2004) NSWCA 332The manufacturer of a chocolate bar was found liable for failing to make goods ofmerchantable quality when a consumer was injured by a safety pin in the chocolatebar she consumed.Limits on CompensationSuppliers and manufacturers are entitled to claim that only certain remedies will beavailable where guarantees are breached with respect to non-domestic goods (e.g.goods that are used for business purposes). That is, for goods not used for personalor household purposes, suppliers and manufacturers can claim that only refunds areavailable, or only replacement is available, and so forth. Suppliers andmanufacturers must ensure, however, that these limitations are 'fair and reasonable'(s64A).ExampleQ. Penny purchases a new football scarf which carries the AFL endorsed label. Itturns out the label is a fake so she is now demanding a refund. Should Penny claimagainst the supplier or the manufacturer?A. Penny can demand a refund from either. It would probably be easier to go to thesupplier from whom she purchased the scarf than to try to track down themanufacturer.Self-testing Exercise 3

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